Taib Mahmud's Timber Politics

How Taib Mahmud's Power in Sarawak is Maintained Through Timber Money

Extracts from David Brown's doctoral dissertation "Why Governments Fail to Capture Economic Rent: The Unofficial Appropriation of Rain Forest Rent by Rulers in Insular Southeast Asia Between 1970 and 1999" (374 pages) will be posted in Sarawak Headhunter from time to time, but those who want to read and keep the whole dissertation will find it here.

It dates back to 1996/1997 (but not much has changed since then and the situation has probably worsened) and also includes a study of timber politics in Indonesia for the same period.

If after reading this, anyone still wants to support Taib and his gang of thieves, then they deserve what is coming to them.

Chapter 1 Introduction

The world’s tropical rain forests are important socially and environmentally as well as by virtue of their contributions to economic growth. As these forests are logged, their social values as generators of rural incomes and their environmental services as biodiversity reserves, carbon sinks, soil reserves, and watersheds tend to diminish.

Despite these facts, most governments in the tropics are unable to resist logging these forests in favor of national economic objectives, including: creation of a forest industrial sector, higher employment, positive balance of payments, and increased government revenues.

However, given the high economic stakes that can be obtained from their forests, it is seems counterintuitive that tropical governments rarely succeed in optimally harnessing government revenue from this valuable natural resource. This staggering loss of revenue to developing countries obviously has important implications for economic development. Timber revenue could be used, for example, to finance the kind of strategic industrial policies that allow the high performing Asian economies to achieve high levels of economic growth.

This dissertation argues that states with rain forests are often unable to collect optimal revenue from the massive profit earned by timber companies that harvest state forests because this profit already has a hidden destination.

Heads of state and their political supporters are siphoning off these moneys to become phenomenally wealthy. This dissertation focuses on the institutional conditions that determine whether "economic rent" earned from harvesting tropical rain forests ends up in government treasuries or in the private bank accounts of political elites.

........

Chapter 4 Unofficial Timber Rent Appropriation in Sarawak

This chapter details the methods whereby the rulers of Sarawak, East Malaysia, informally extract economic rents for personal and political gain, and how this affects the levels at which timber revenues are formally set.

Sarawak politics and forest management

Although Sarawak is only a state within the Federation of Malaysia and not a country, Sarawak will be considered as a nation for the purposes of this dissertation as it maintains complete control over its timber resources and, in that sense, retains the policy characteristics of national sovereignty.

During the period covered by this study, Sarawak had two chief ministers: Tun Abdul Rahman Yakub, who served from 1971 to 1981, and his nephew, Taib Mahmud, who served from 1981 to the present.[1] As with the recently deposed Suharto, Taib Mahmud's power is almost absolute. Asiaweek identified nine "political warlords" in Asia: two each were identified in Thailand, the Philippines, Pakistan, and India, and one in Malaysia, the chief minister of Sarawak. Taib Mahmud is described: "He has no private army, but he runs the closest thing to a Malaysian political fiefdom. Kuala Lumpur leaves the Sarawak chief minister alone in return for keeping the state sweet at election time. Massively wealthy from timber concessions, he drives around in a Rolls Royce" (Asiaweek 1995b).

Sarawak's chief minister is elected by a majority vote of the state assembly. However, the state is full of different ethnic groups that share little common ground. This makes for a complicated story of political compromise. For the entire period covered by this study, most state assemblymen have banded together in what is known as the Sarawak Alliance to select Tun Rahman and, later, his nephew Taib Mahmud, to serve in succession as the state's chief ministers. The Sarawak Alliance is made up of four parties. The PBB consists of the Melanau, a small ethnic group to which both of the chief ministers belong, plus nearly all of the state's Malay population, plus a sizable portion of the state's Dayak[2] population. The SUPP is comprised of Malaysians of Chinese ancestry. The SNAP is made up mostly of members of the state's Dayak groups, and some Chinese. In recent years a fourth party, the PBDS, made up almost entirely of Dayak voters, has eclipsed the SNAP. As long as these four parties continue to attract support (even if they have to buy it) and stay together in a coalition to support Taib Mahmud, he will continue to rule.

The Sarawak Alliance staunchly supports not only Taib, but also the national leader, Prime Minister Mahathir Mohamad. It has long been the case that all federal parliamentarians elected from the Sarawak Alliance have thrown their support to Mahathir. Muniandy Thayalan, the head of a leading Malaysian environmental NGO, suggested an agreement in which Mahathir does not interfere with Taib as long as Taib delivers crucial votes to maintain Mahathir in power (22 August 1996 interview with Muniandy Thayalan). Because Mahathir can count on Taib to round up the support of Sarawak's parliamentarians, Mahathir takes a hands-off approach to internal affairs in Sarawak, including the manner in which the state's forests are managed, a matter to which I now turn.

The Sarawak Forest Department controls the majority of Sarawak's forests and issues regulations designed to achieve the sustainable harvest of those forests. The autonomy of the department, however, is severely limited due to the fact that it is under the control of the Ministry of Resource Planning. Taib himself has held the position of Minister of Resource Planning since 1985. Therefore, Taib has the final say over the level at which timber revenues will be collected from concessionaires and over the distribution of timber concessions. A source makes the following observation about Taib's omnipotence in the awarding of timber concessions:

At the top of the hierarchy is the minister of resource planning, who has sole discretion to give out logging concessions. Taib finds the time to hold this portfolio himself, along with that of chief minister. Under the law, he can grant concessions to anyone he wants: relatives, friends, political associates, or nominee shareholders - people who hold concessions on behalf of secret beneficiaries. The concessions are granted free of charge, and the holder isn't required to know the difference between a live tree and a telephone pole (Sesser 1989: 282).

In Sarawak, as in Indonesia, the head of state has found it to serve his financial and political interests to informally appropriate timber rent. One source estimated that Taib has amassed $4 billion through his connections to the timber industry (Rainforest Action Network 1993). According to an interview with a former Sabah chief minister, Taib personally takes RM30 ($12) from each cubic meter of timber cut in the state (1 and 2 October 1996 interview with Harris Salleh). The chief minister is the state's third largest timber concession holder (see Table 4.3 below). His appropriation of timber rent is in large measure intended to augment his and his family's personal wealth.

The use of timber rent to further national and state political objectives is also important. As Chief Minister Taib Mahmud stated succinctly, "'Sarawak politics is timber politics'" (FEER 1987). Since the early 1970s, Sarawak has unofficially delivered to the national ruling party a share of Sarawak's timber rent. The rent is used by the national ruling party both for political expenditures at election time and for financing the business objectives of ruling party-linked conglomerates (28 March 2001 interview with Daniel Lev).

At the state level, the use of timber rent for political ends was perhaps best demonstrated in the Ming Court affair of 1987, when Taib fought off a challenge from his uncle and former chief minister, Tun Rahman. Although the seeds of the Ming Court affair were sown long before,[3] the crisis was precipitated by Taib's cutting off timber rent to a wide range of politicians, especially state assemblymen loyal to his uncle, and by his move to gain full control over the granting of concessions by assuming the additional portfolio of Minister of Resource Planning. Both actions created considerable resentment among politicians who had been tacit supporters of Taib up to that point. As recounted in one publication:

In early May [1985], Taib all but named three principal 'co-conspirators,' in a plot to oppose his leadership. . . . But the orchestrator of the machinations, Taib alleged, was his uncle. [The chief minister told this reporter that] the depressed timber market had put concession operators in a tight spot, leading in turn to pressure for relief on some payments to business partners [‘business partners’ here denotes Sarawak politicians]. These partners need more funds, it was suggested, but the current leadership [Taib] balked at their incessant demands. The statutory powers to supervise the granting of concessions, which reside in the minister of forests, obviously command close political attention - especially as the minister potentially has wide powers to revoke licenses. . . . The Review understands that Taib intends, personally, to assume the portfolio [of minister] . . . in June (FEER 1985f).

Plots by co-conspirators continued during 1986, driven by Taib's threats to take away their lucrative timber concessions.[4] The Ming Court affair in 1987 was precipitated by the chief minister’s plan to "screen," in reality to single out for punishment,[5] concessions held by politicians whom Taib chose to no longer favor and to revoke those concessions. As described by a Sarawak-based correspondent who followed the story closely at the time,

The Sarawak political crisis is believed to have been triggered by the move to screen timber licenses in the State – a great portion of which belong to certain politicians and their supporters. To date, about 30 timber licenses of companies linked to an ex-politician [Taib’s predecessor Tun Rahman] have been revoked. According to sources, the State Government’s recent drive forced an ‘underground movement of politicians’ linked to timber concessions to act fast to protect their interests . . . Recently the state government stepped up its drive against Datuk Taib’s detractors and revoked the timber licenses of two businessmen for transferring their concessions without informing the authorities. Following that, the State Government announced that it would screen all timber licensees who ‘abused the timber industries.’ This included licensees who sold or transferred their licenses or sold or transferred shares. Last week’s screening of timber licenses made mandatory the obtaining of approval from the Government even for a change in partnership in a timber company or appointment or change of logging contractors, otherwise the license would be rendered invalid. According to Taib loyalists, the move hurt the pockets of the ‘Old Guards’. . . The sources said the political group opposed to Datuk Taib’s administration was desperate (Sunday Mail 1987).

The revocation of timber licenses on the magnitude of that precipitating the Ming Court affair is unprecedented in Sarawak's history, as shown in Table 4.1.

Table 4.1 Natural forest timber concessions granted and revoked by Chief Minister Taib during his first twelve years in office, 1981-1993

Year	Number of concessions granted	Number of concessions revoked
1981	7	0
1982	3	0
1983	8	0
1984	17	2
1985	35	1
1986	19	10
1987	36	26
1988	13	7
1989	7	4
1990	23	21
1991	4	3
1992	6	4
1993	24	20

Source: Annual Reports of the Sarawak Forest Department (1981-1993)

Once the press reported which politicians would lose their timber concessions, events moved quickly. Threatened politicians flew to the Malaysian capital for a secret summit on unseating Taib. Tun Rahman, who had started a new party called Permas, led the rebels. The rebels also included PBDS, a party that had broken away from the ruling coalition. The rebels planned to bring a vote of no confidence in the state assembly and to obtain a parliamentary majority. Chief Minister Taib responded to this threat by dissolving the state assembly and by calling for elections to be held a month later. The rebels responded by promising cash payments of $500,000 to every state assembly contestant who joined the opposition camp, a sum that would have been paid out of timber rent had the opposition won. However, in the end, Taib maintained his power. These events are summarized in Table 4.2.

Table 4.2 Dates and key developments during the Ming Court Affair of 1987

Date of event	Key development
Friday, 6 March 1987	People’s Mirror carries story of Chief Minister Taib’s intention to put a “Screen on Timber Licenses” (Ritchie 1987: 18).
Sunday, 8 March 1987	Anti-Taib rebels fly from Kuching (capital of Sarawak) to Kuala Lumpur (capital of Malaysia) to meet and discuss how to unseat Chief Minister Taib.
Monday, 9 March 1987	Secret meeting begins at Ming Court hotel in Kuala Lumpur. A journalist monitoring events conjectures that there was “sufficient resentment for rebellion. Those who would be dissatisfied would include those . . . with timber concessions. . .” (Ritchie 1987: 17).
Tuesday, 10 March 1987	Four ministers, three deputy ministers resign from Taib’s cabinet and join the opposition. Taib announces at press conference that there is a plot forming against him at the Ming Court Hotel. Mood of opposition politicians said to be “euphoric” as they decide amongst themselves, “who gets what . . . who was going to take over the various government statutory bodies and corporations” (Ritchie 1987: 27)
Friday, 13 March 1987	Taib dissolves the Sarawak state assembly. It is announced that a statewide vote will follow on 15-16 April 1987. “[W]hen it appeared clear that an election was imminent, two reliable . . . sources said that value of each rebel went up to the tune of $500,000 per contestant” (Ritchie 1987: 38).
15-16 April 1987	Statewide elections are held. Pro-Taib forces prevail, maintaining a majority of seats in Sarawak state assembly. Taib is nominated to a third term as Chief Minister.

The Ming Court affair is perhaps the most visible instance of the use of the state’s timber resource to achieve political objectives. However, timber rent is used in more direct ways to achieve political objectives, such as buying votes at election time. Elections in Sarawak are expensive.

To illustrate the high cost of buying elections, the ruling party spent about $400 per voter, or $4 million to defeat a candidate for the state assembly, Chiew Chin Sing, who would have represented only about 10,000 voters.[6] During the weeks approaching the election, ten different teams of senior Sarawak Alliance officials, their officeholders and retinues visited all of the 180 longhouses in the district, holding parties each night in ten different longhouses. [7] Chiew explained how these 10,000 voters were wooed:

Expenses were as follows: most members of the traveling parties were paid a salary. For each longhouse party that was held, five pigs and fifty cases of Heineken beer were purchased. In addition to the good times at the parties, where many promises were made, each family was given RM1,200 ($480) to vote for Chiew’s opponent.

The ruling coalition ensured that a family whose head received a $480 bribe would actually vote for the ruling coalition candidate by paying only $240 per family up front, with the remaining half to be paid only if the ruling coalition candidate carried a large majority in that longhouse.

To pay the second installment, the ruling coalition rented out as campaign headquarters the entire Lee Hua hotel in Sibu, the large city downriver from Chiew's largely rural district. Chiew said after the election, the headman from each longhouse would travel to stay at the hotel, and collect the second installment of the bribes for the families in his longhouse. In that particular election the ruling coalition candidate defeated Chiew by a vote of 6,938 to 1,457 (19 July 1997 interview with Chiew Chin Sing).

Charges of vote buying in Sarawak were confirmed in a review of Malaysian politics:

[T]he High Court made political history when it declared an election victory by the ruling Barisan Nasional (BN) coalition null and void due to vote buying. The judge ruled that "vote buying was so extensive [that] it had affected the election result" in the Bukit Begunan constituency in the September 1996 Sarawak state election. Although vote buying by the BN is widespread in Malaysia, hitherto it has been almost impossible to prove it in court. In this case, however, there was clear evidence including photographs showing cash being handed out by BN campaigners to voters just prior to election day. In the subsequent by-election, the same BN candidate from Parti Bansa Dayak Sarawak (PBDS) who had won in the voided election easily won the seat again (Asian Survey 1997).

In Sarawak, much of the money to buy votes comes not from timber rent appropriated by the chief minister but from that of his political supporters, who have been given timber concessions for that purpose. Sarawak Alliance party operatives and Sarawak Alliance state assemblymen are awarded timber concessions provided that they make cash available during election time. Similarly, politicians who can secure large majorities for the Sarawak Alliance in their areas can prevail upon the chief minister to award them timber concessions (26 May 1997 interview with Lao Siew Chang).

For timber conglomerates themselves, so long as they are willing to make money available to the ruling party during election time, this will ensure their ongoing ability to gain access to new timber concessions as they exhaust old ones. Some conglomerates control so many concessions because during election time senior politicians come to them for campaign donations. Once the politician has been re-elected the timber conglomerate comes back to the politician and requests his help in obtaining new concessions from the chief minister (26 May 1997 interview with Lao Siew Chang).

When political supporters serve as board members and shareholders in timber concessions, they do not simply serve as a conduit for funds to the ruling party during election time but also gain personal wealth as a payment for their loyalty. At some level, it is a meaningless exercise to try to determine whether a political supporter's position on the board of a timber company signifies that they are there to get rich and in exchange for that privilege remain loyal to the chief minister, or to finance the political expenses of the chief minister’s party. According to James Chin, board members and major shareholders work both for themselves and their parties, depending on the electoral cycle. If it is not election time, then the board members and major shareholders bank substantial salaries.[8] However, if it is election time, especially during the final months, the political supporter is expected to contribute funds to the ruling party. If they do not perform this latter function or if they have otherwise demonstrated disloyalty, when their concession is up for renewal the "chief minister asks the forestry department to rigorously enforce" its regulations with respect to that disloyal politician's concession, which provides a pretext to deny the renewal of the concession (30 June 1997 interview with James Chin).

In short, timber wealth is used both to create wealth for the chief minister and his political supporters and to ensure his political longevity. My analysis rests on a review of the managerial and equity profiles of the timber concessions licensed to each of the state's four largest private timber groups and more general types of information on the state's fifth through ninth largest private groups. Sarawak's nine largest private timber groups are ranked by size of concession holdings in Table 4.3 below. The forest areas being logged by the four largest groups are mapped in Figure 4.1.

Table 4.3 Ranking of Sarawak timber groups by concession holdings, 1996

Rank	Name of timber conglomer ate	Senior figure	Total area (hectares)	Source(s)
1	Samling group	Yaw Teck Sing	1,636,320	Samling Corporation internal document obtained 22 October 1996; written estimates of a Sarawak-based researcher obtained 15 November 1996.
2	Rimbunan Hijau group	Tiong Hiew King	1,500,000	Remarks of William Wong, head of investor relations for Jaya Tiasa, Rimbunan Hijau’s publicly listed flagship, during a 29 October 1996 visit to Rimbunan Hijau headquarters.
3	Taib family group	Chief Minister Taib Mahmud	998,011	Ritchie 1987: 84-85; Sarawak Tribune, 11 April 1987
4	KTS group	Lau Hui Kang	500,000	The Edge 1995d
5	WTK group	Wong Tuong Kwang	400,000	The Edge 1995d
5	Shin Yang group	Ling Chiong Ho	400,000	Sarawak Securities 1997b: 22
7	Ting Pek Khiing group	Ting Pek Khiing	311,239	Business Times 1992a&b; Jardine Fleming 1993; Star 1995b
8	Limbang Trading	James Wong	185,490	Asian Wall Street Journal 1994b
9	Ling group	Ling Beng Siew	120,000	Sarawak Securities 1996: 4

Samling

Sarawak’s and Malaysia’s largest timber concession holding company is the Samling group.[9] As shown in Table 4.4 below, a number of concessions licensed to the Samling group include Chief Minister Taib’s family, proxies and political allies as board members and shareholders.[10] Among the more interesting Taib-linked figures found in the table below are the chief minister’s cousin who serves as a senior business figure in the family, and the chief minister's bomoh (traditional healer and spiritual medium). Among the more straightforward recipients of political patronage are an assemblyman known by the nickname of "Giant Killer" because he successfully defeated Taib’s uncle and political rival in the 1987 election, and a nominee said to represent Sarawak’s Minister of Finance George Chan in two-thirds of Samling's timber concessions.

---

[1] Prior to assuming the chief ministership, Taib held seven different federal cabinet portfolios between 1968 and 1981, including Minster of Defense, Minister of Federal Territories, and Minister of Primary Resources. As Minister of Primary Resources Taib was nearly sacked for taking a large bribe from an oil company (23 May 1997 interview with a reliable and informed academic).

[2] Actually, there is no "Dayak" group as such. "Dayak" is in fact a catch-all phrase intended to encompass the non-Chinese and non-Malay indigenous groups of Sarawak, including the Iban, the Bidayuh, and the orang ulu - the latter being a name for the myriad of groups that live far upriver in Sarawak's hilly interior, and have been most deleteriously affected by the state's timber industry.

[3] Toward the end of his tenure as Prime Minister of Malaysia (1976-1981), Hussein Onn effectively forced Sarawak's chief minister of that time, Tun Rahman, from office. Hussein regarded Tun Rahman as corrupt and as the ally of Hussein's predecessor Tun Abdul Razak. Tun Rahman went on to assume the governorship of Sarawak. His replacement in the chief ministership was his nephew Taib Mahmud. However, many of Tun Rahman's loyal lieutenants remained in office. "As a result, fissures gradually emerged between those owing loyalty to the new Chief Minister, and those owing their allegiance to the Governor" (Leigh 1991: 181). A war of words and actions ensued between the two men starting in late 1984. In 1985, Tun Rahman sent a public letter to Taib criticizing him, and accusations against Taib began to appear in the then-Rahman-controlled Sarawak Tribune. As governor, Tun Rahman had the power to call a state assembly session, in which, if 25 votes could be gotten, Taib would be removed from office. Taib moved quickly to head off the threat posed by his uncle. With the imprimatur of then-Malaysian Deputy Prime Minister Musa Hitam, Taib appointed a new governor, removing his uncle from that post, and began to purge pro-Tun Rahman figures from the government ranks (26 May 1997 interview with a reliable and informed academic). Tun Rahman rallied for a final attack on his nephew two years later in the Ming Court Affair.

[4] According to Ritchie, "when Taib was vacationing abroad with his family and seeking medical treatment for a sinus problem,"two Sarawak politicians traveled to London to meet with Tun Rahman. "Sources said that one of them spoke informally about the 'squeezing' of one concession which one of them shared with a member of the pro-Rahman faction" (Ritchie 1987: 42).

[5] Taib accused these timber concessionaires of violating Sarawak timber management regulations. But virtually all timber concessions in insular Southeast Asia are in violation of at least one of a host of timber-related laws at any given time. Therefore, the head of state can technically find any concessionaire to be guilty of noncompliance at any time.

[6] Another source who was in Sarawak for the 1996 state elections said that on the final day before polling, he saw RM660,000 ($264,000) in bribes being given out to voters in a single location. The bribes ranged in size from RM600($240) for each indigenous voter to RM2,200 ($880) for each Malaysian Chinese voter (1 October 1996 interview with a knowledgeable Sabah-based source)

[7] Indigenous communities in Borneo are often clustered around one or more longhouses. Built up on stilts, longhouses contain dozens of single family dwellings, built side-by-side, and connected by a long common porch.

[8] Chin estimates that a Sarawak politician serving on the board of a typical timber concession banks between five and eight percent of the total profit of the concession.

[9] While many believe Sarawak's and Malaysia's largest timber group is Rimbunan Hijau, an internal spreadsheet compiled by a Samling employee put the total number of Samling concessions at 18, with four in Lawas, seven on the upper Baram region, and seven near Bintulu (Samling 1996). This total just over 1.6 million hectares, which just edges out the 1.5 million hectares of “official” holdings acknowledged by a Rimbunan Hijau official (26 October 1996 interview with William Wong). Samling is also the world’s largest owner of Caterpillar tractors (22 October 1996 interview with Samling official).

[10] A well-placed and knowledgeable Sarawak source suspects that Samling is owned by the chief minister's family through nominees (26 May 1997 interview).

(To be continued)